Debt And Credit Myths

MYTH: Pay off the highest rate first.

MYTH: Co-signing a loan is not risky.

MYTH: Debt consolidation is the best relief option.

MYTH: There’s no really good way to get out of debt.

There is so much information conveniently at our disposal on the Internet these days regarding debt, debt reduction versus debt consolidation and/or how debt management companies, we tried to simplify the most articles we see across this spectrum and try to help you understand each one.

Credit Myth – Pay Off Highest Rate First

Myth: I should be paying off the debt with the highest interest rate first, get that one out of the way, then go to the next highest interest rate, to get that one out of debt quickly and so on.

Truth: You should do just the opposite, and pay off the smallest debt first to create the greatest momentum in your debt snowball. The debt snowball effect is another concept circulating around the Internet, we will explain to you as well. However, this is not ideally the best way to attack debt either.

The folks that advocate the snowball effect would prefer you tackle the smallest credit card debt on your list first. Then once that particular creditor is paid off, you then take the money you were using to pay off credit card # 1, and apply those monies to pay off credit card # 2, and so on. The concept behind this is a “feel good” philosophy. If you feel like you are having some relatively quick success in paying off your smaller debt, you are more likely order to stay “in the game” and go after the next credit card. What they do not tell you is your highest debt with the highest interest rate is almost doubling faster than you can get a handle on it

gain, the principle of the snowball effect is to stop everything except minimum payments and focus on one thing at a time. Otherwise, nothing gets accomplished because all your effort is diluted. At Nationwide, we are absolutely opposed to this type of credit card debt management. Creditors cannot be ignored, especially the big ones with the high-interest rates. We would much rather negotiate and settle those debts for a fraction of what you owe. If you are an average American, you currently have approximately 5-7 credit cards in your wallet and owe somewhere between $25,000 to $50,000 in credit card debt.

You cannot afford to sit around and “feel good” when the stakes are much higher at this level of credit card debt. Therefore, we believe that by utilizing our debt reduction process, whereby our professionally trained staff can negotiate directly with creditors to settle your current debt for a fraction of what you owe is the answer. Leave the snowballs to the kids playing outside in wintertime.

Credit Myth – There is no real good way to get out of debt.

Myth: There is no real good way to get out of debt.

Truth: There are excellent programs out there to help you get out of debt.

The first one has to begin with a mindset. Without that, you will just fall back in the same trap once we show you how you can get out of debt in 1-3 years, depending upon how much total debt you have.

The answer is not by lowering your interest rate. The answer it by changing the way you live, changing your mindset and by changing your habits. It starts with a game plan and simply taking a look at just exactly where you are right now.

Credit Myth – Co-signing a loan is not risky

Myth: There is a very little risk in co-signing a loan for a friend or family member. By cosigning a loan, I am doing them a favor.

Truth: Never Co-sign a loan for anybody, unless you are prepared to pay back the entire amount on your own.

Creditors love cosigners for a reason. It provides them with extract insurance should the initial borrower default on their payments.

If you look at it from the creditor’s perspective, here is how they view a co-signer. Debt is the most aggressively advertised and marketed product in our culture today. Creditors and lenders must meet sales quotas for their loan production. Therefore, if lenders can project the likelihood of a loan going into default with reliable accuracy, then a co-signed loan gives the lender a higher percentage of the loan/credit card not going into default. Even with this said people unwisely cosign for friends and family every day.

Most of those that do cosign usually do it for emotional reasons. Common sense could not take us on this ride. To begin with, we truly believe that the person we are cosigning for will really pay back what they own because we know them. That is the trap. Parents cosign for the newlyweds to buy a home. Why do they need a cosigner? Is it because they could not afford the home in the first place? Parents cosign a car loan for their son or daughter to help them learn to be responsible. Unfortunately, what son/daughter needs to learn first is: if you cannot afford to pay for something, do not buy it!

Finally, what happens if we do allow our emotions to get the best of us, we assume or pray they are doing the right thing and we cosign a loan? Typically what happens is we, the cosigners, end up paying the loan off, as well as risk damage to our own credit report.

Say for example you cosign for that auto loan, the lender does not contact you when the loan is paid late every month, but your credit is damaged every month. The lender does not contact you before they are about to repossess the car, however, when they do, you will now have a car repossession on your credit report. Then, they contact you to pay the difference between the loan and the repo price they got for the vehicle, which is called a deficit. If the lender did contact you prior, there is nothing you can legally do to force the sale of the vehicle because you don’t own it; you are merely financially for the loan. Cosigning for a mortgage will get the same results.

Therefore, unless you are ready and willing to pay the debt yourself, NEVER cosign a loan for ANYBODY!

Credit Myth – Debt consolidation is the best relief option.

Myth: By choosing to use a Debt Consolidation plan, you will save interest and you will have one smaller payment.

Truth: Debt consolidation is probably the worse case scenario you can pick, as these companies not only collect money from you, however they collect money from the creditors as well. A BIG conflict of interest!

Debt consolidation is very much like a con game. You truly believe that you have done something positive about the debt problem. What you do not realize is that the problem is still there, as well as the habits which caused the debt in the first place. The only thing you have done is move your debt from point A, your home to point B, the debt consolidation company! The truth is you cannot borrow your way out of debt.

You cannot get out of “the debt trap” by digging out the bottom.

Larry Burkett, a noted financial author, states that debt is not the problem; it is the symptom. Debt is nothing more than overspending and under-saving. Our debt counselors will never recommend a debt consolidation for you as a way to get out of debt. Why? Because debt consolidation does not work! In fact, once people figure this out, usually between 9 months and a year, they drop out of the program at a rate of 85% to 90%, IN THE FIRST YEAR ALONE!

A friend of mine works for a consolidation company. Her primary job is to hold “financial education” classes on evenings and Saturdays. She told me that was the “guise” of why she worked there. Her primary job, and the one she made here money on was to try and keep customers in the debt consolidation program as long as she could. That sure does not sound like a positive plan to me.

Debt consolidation does seem appealing to some because of the lower interest rates on some of the debt and lower payments. In almost every case reviewed, you find that the lower payment exists not because the rate is actually lower but because the term of the debt is extended out for longer periods of time. Therefore, if you stay in debt longer, you will get a lower payment, however, if you stay in debt longer, you pay the lender more, which is why these companies are in business to begin with.

Let’s say for example you have $35,000 in unsecured debt, including a two-year loan for $20,000 at 12%, and a four-year loan for $15,000 at 10%. Your monthly payment on the $20,000 loan is $941 and $380 on the $15,000 loan, for a total payment of $1,321 per month. The debt consolidation company tells you they have been able to lower your payment to $631 each month and your interest rate to 9% by negotiating with your creditors and rolling the loans together into one. Sounds great, doesn’t it? Who would not want to pay $690 less per month in payments?

However, what they do not tell you that it will now take you six years to pay off this debt. This still may not sound that bad to you unless you realize just how much more you will actually pay in additional payments. You will now pay $45,432 to pay off the new loan vs. $40,852 for the original loans. So even with the lower interest rate of 9%, you actually paid $4,580 more for the “lower payment.” This is why our debt settlement professionals will never recommend this type of program to you.

Debt Relief Tips

How to use the recession and eliminate unsecured debt.

Use the recession to eliminate unsecured debt.

How to choose a legitimate and proven debt settlement company.

How to Apply For the Best Debt Settlement Programs

Your Seven-Step Plan

Dealing with Credit Card Debt from the Get-Go

Miscellaneous Debt Relief Tips

Scare Tactics Debt Collectors Use

Debt Relief Tip – 15 red flags you need assistance with your bills

Debt Relief Tip – How to Use the Recession and Eliminate Unsecured Debt

The current economic problems in the U.S. today have placed many Americans at wit’s end regarding their personal finances. In addition, slow down in the economy coupled with unemployment has lowered the income of many families. Numerous Americans have lost their jobs and/or faced a decrease in pay as corporate America has down-sized or taken cost-cutting measures within their organizations. Along with the decrease of income, the cost of living and taxes continues to go up, with no end in sight. Many people today are finding trouble just trying to run their day to day or monthly expenses. Lastly, they are using their credit cards to supplement their income!

There was another almost equally sour impact of our country as we go through one of the longest recessions we have faced in our generation and the impact that has on the profits of credit giving companies. The delinquency rates for credit issuers have almost doubled in the past 5 years. The recession has also forced many organizations to close their operations due to the high losses through suspicious bookkeeping. Add to that the sub-prime housing market, and you have the ingredients for a full-on meltdown where the government its unique wisdom, puts our country deeper in debt, thinking that will solve the problem.

Since we do not believe that throwing money at the problem will solve it, we believe we (our government and us as individuals) should do everything we can to lower and get out of debt and the sooner the better. For the government, this could take decades. For individuals, it could take as little as 1-3 years, before becoming completely debt free from your unsecured debt issues.

Taking advantage of a debt settlement program will not only give you peace of mind, you will see how truly easy the debt settlement process really is and why it has become so popular today. Contact a consultant at Nationwide Debt Reduction Services today and let us see if we can help you become completely debt free in 3 years or less!

Debt Relief Tip – Use the Recession to Eliminate Unsecured Debt

The current economic trend In America has put many more people in financial straights than ever imagined. Unemployment, underemployment and a longer than expected recession has middle America grasping at straws. Add to that the sub-prime housing mess and you have Americans finding trouble to run their day to day expenses. You don’t have to wonder why so many Americans are turning to their credit cards just to make ends meet.

There is an equally negative impact of the recession on the profits of companies causing them to turn to more layoffs, and the downward cycle continues. Those facing delinquencies have risen tremendously, and no one really knows where on when it will stop. In addition, the recession has forced many smaller businesses to close their doors. What many people fail to realize is that it is the small business in America that is the backbone of our economy

Then we had what was suppose to be the answer with the $700 billion bailout package. Instead, that money was used to bail out banks and buy more companies like General Motors (now considered Government Motors). The Government we thought was going to give this money to states and agencies to get the economy back on its feet again. No such luck!

Millions of American are now struggling with their credit card debt, as they approach their lines of credit, or the credit card companies have cut their lines of credit limiting their exposure. So, where does one turn?

If you look at debt reduction versus say filing for bankruptcy, you might be surprised what these companies can do for you. To begin with, debt settlement companies can stop harassing creditor calls. They can lower your debt by negotiating directly with the credit card companies. They can help you lower your monthly payments to something that is more affordable. In fact, more American have turned to debt reduction as the primary way of getting out of debt in the 21st century.

Debt Relief Tip – How to Choose a Legitimate and Proven Debt Settlement Company

It is very difficult in this day and age of the proliferation of debt reduction or debt relief companies to ensure you are choosing the best or right one for your circumstances. That is why Nationwide Debt Reduction Services, with a truly American mentality of acting in a moral and ethical manner, we believe is the best choice for you. It is not uncommon to find American across the United States suffering what they feel is a helpless situation. In addition, when people are facing a financial disaster or contemplating bankruptcy it only compounds the issue.

There are many, maybe too many debt relief companies which specialize in debt reduction programs. For the most part, the majority of them will listen to the client when they interact with them and tell them their problem. In fact, over 50% of our own staff has been through our program themselves! The debt consultants are trained specialist who can tell whether or not this program would be a good match for them. In addition, we insist on pre-qualify our clients to ensure we can do what we promise to do. Other things you can do are:

Begin your search by looking up the company through the BBB (Better Business Bureau) and see how many complaints the company has had against it. The number of complaints will tell you the complete story.

Are they with their local chamber of Commerce? Why not?

Are their agents qualified to speak to you? If they aren’t certified, can you trust them?

The customer can also look for information through Dun and Bradstreet (D & B). This organization tracks the financials of most companies throughout the United States. (D & B usually charges a fee of approximately $110 for this information.). Nationwide Debt Reduction Services is accredited with Dun & Bradstreet making us the ideal debt relief company for Americans.

The customer can always go online and look for service and procedure of the companies and compare them before signing up a company.

A good company with a good track record will help the customer to fetch good results. It’s in the best interest of the customer to look around before handing over the financial details to any company.

Debt Relief Tip – How to Apply For the Best Debt Settlement Programs

Do you remember the old adage; “If it sounds too good to be true, it probably is?” Well, that is how we feel about our debt reduction program, however, it is not free. It is inexpensive, however. Remember, our company NEVER charges you a percentage of your debt. Our set-up fee is based on a sliding scale and dependent upon how much debt you have. Our negotiators have an incentive to the very best job they can do for you. Does it get any better than that? It does, because we can literally take your debt, lower the principal, and have you debt free in 1-3 years if you want to.

The debt settlement process depends on a number of factors which includes the role of the loan taker. There are companies which have the opinion that the role of customers is confined to making payments only. However, this option can be a loss for the customers who fail to understand the progress of the case. If the customer takes an active interest in the case progress, there are higher chances of getting a better debt settlement.

Then there are debt relief companies like ours which provide reliable professional consultants to guide you in understanding the entire process. The fact is that settlement companies would not have such a high popularity rate if they were not doing the job they are being paid to do.

Banks and credit card companies used to be in a stronger position and their terms and conditions for negotiation. Today, that is definitely not the case. With the write-offs and write-downs these companies are taking, along with the number of people filing for bankruptcy, the organizations would much rather get something than nothing at all. They will accept a lesser dollar amount because they know they have already made lots of money from your accounts already.

Getting out of debt through the debt settlement process is currently one of the most popular alternatives to filing for bankruptcy today.

Debt Relief Tip – Dealing with Credit Card Debt from the Get-Go

The need people have for so many things cluttering their lives is really having an effect on the ever-increasing credit card debt. Debt is glamorized until your living with the horrors. As each year passes, the number of victims of the bank’s willingness to grant increasing credit limits is growing to fatal plague proportions. Sadly, if the limits are not raised enough then the consumer has plenty of options available to get more debt from other lenders.

The Global Financial Crisis should have been the wake-up call for the institutions as credit card debts and mortgage loans go spiraling out of control. However, no one it seems is prepared to bite the bullet and say “enough is enough.” There is just entirely too much profit to be made by big banks in this arena.

Consumers, on the other hand, especially those who are stuck in the “debt trap” and use their credit cards to live off of, are left struggling each month just trying to make the minimum monthly payments … and getting nowhere fast! The problem is not going to go away anytime soon and the financial institutions continue to allow credit in ever-increasing limits to people who cannot afford the debt.

If you have several credit cards and carry balances, then you too are at risk of becoming a statistic in this credit-debt-bankruptcy spiral. In most bankruptcy cases credit card debt is the prime reason for the financial crisis. The last thing on people’s minds during the euphoria of over-purchasing on their credit card is the additional interest they will be paying on top of the ticket price not to mention how long they will be paying for the item because of the high-interest rates.

We suggest you stop all this nonsense and take control of your life. Our professional debt counselors can show you ways to systematically reduce your reliance on credit, while at the same time, start you on a plan to reduce your current debt through our negotiation process. You can start the process on your own by going to your local office supply store and purchase a paper shredder for $29.95. Then, when that new offer for gold, zero percent, credit card offer comes in, you can shred it before even opening the envelope. By doing this, you have literally started the wheels rolling to become debt free

Next, you can start eliminating any extra credit cards that you might have. Without a doubt, there is no reason for you to have any more than one credit card linked to your bank account. Create a family budget and allocate a regular amount each month to reducing your credit card debt and set that as a scheduled payment to your credit card.

Begin to stop your reliance and dependence on your credit cards, while at the same time, let one of our debt reduction specialist show you how we can negotiate and settle your current debt (if it is over $20,000) for a fraction of what you owe.

There is only one person responsible for the debts that have accumulated on your credit cards and so start to take action today to gain control of your life again.

Debt Relief Tip – Scare Tactics Debt Collectors Use

One of the primary things a debt collector is taught in training is how to instill fear into the delinquent debtor. It is beyond us how people can actually do this for a living; however, it is a fact of life. Credit card companies use debt collectors who are literally pros at intimidation. If you do not know how to deal with these people, which most people do not, you stand a very little chance against their ruthless assault.

These collectors usually employ psychological attacks on debtors, forcing many into paying off bills before they tend to the staples of life such as food and shelter. In addition, most collectors work on a commission basis. Therefore, their primary goal is to get a payment from the debtor, thus making themselves money. They will lie, trick, con, and manipulate you any way they can in order to get some type of payment from you.

Some of the more common tactics and common things they will tell the debtor in an effort to scare them:

Calling you several times a day. This is done to harass you as if you didn’t know you owed money. All they are doing is trying to wear you down.

Send official looking documents in the mail pretending to be attorneys. Getting several different kinds of collection letters is common.

Some of them are going to threaten lawsuits but be sure to read the small print. You’ll find that many say your case has never even been looked at by an attorney. These letters are sent out by bulk in the thousands are meant to frighten you.

They are turning your account over to collections. This is part of the usual process and a delinquent account can be actively moving through more than one collection agency over a period of only a couple months.

They are going to “charge-off” your account. This simply means that they are listing your account as delinquent for accounting reasons. It has no impact on the process what so ever.

They are going to garnish your wages. They aren’t, not that easy. Garnishments have to go through a time-consuming legal process and can only be ordered by a judge.

They are going to put a lien on your property. Same thing. Only a judge can order a lien, and there is a required legal process that takes time.

We could go on; however, you get the picture.

Debt Reduction – Your Simple 7 Step Plan

Debt reduction does not have to be an overwhelming experience. Few people want to deal with a cure that is more painful than the ailment? Mounting debt is stressful enough. Then you have to face the task of figuring out where to start in getting rid of it. Finally, you have to figure who’s who and what is right, especially when dealing with debt settlement.

Therefore, we have simplified the approach that will help get you going in the right direction for debt reduction. After all, sometimes the simplest approach is usually the most effective.

This seven-step plan can help you get out of debt and stay out of debt forever:

Spend less than you make. Easier said than done, we know. However, it truly is the first step in any debt reduction effort. The only way to get out of debt is to spend less than you make. The key is to somehow make it happen and budgeting and spending tracking is a good start.

You need to have a working budget or budget sheet. Again, not your favorite thing to do on a Saturday afternoon, however very important to the process of debt reduction. Once you have made your budget, you need to follow it. This can be a killer in the first month or two, however, once you see it working, you will pleasantly be surprised.

Learn the difference between your good and bad debt. Good debt helps you make money in the long run or at least will not lose you money. Mortgages and student loans are both examples of good debt. Your house usually appreciates over time and an education usually helps you get better-paying jobs.

Choose the one credit card you have that has the lowest interest rate. Make sure the spending limit is within your monthly budget and then use this card for emergencies only. Now that you have identified your lowest interest rate card, make sure to never take it with you when you go shopping. Cut up the rest of the credit cards and use cash or your debit card only.

Take all your other bills/credit card debt and add up how much you owe. If it adds up to over $20,000 you are in what we call the “debt trap.” This is where you will need to call one of our professional debt counselors and discuss a debt relief program.

Contact your other creditors and try to negotiate a lower interest rate. If you have been with the lender for a long period of time with a good payment record, you have a fairly good chance of getting your “good debt” interest rate lowered.

Make sure you have enough for emergencies. It is great to be aggressively paying off your debt but you need to also plan for the unexpected. Don’t have your budget so tight that it doesn’t allow for a misstep. You need to be in a position where you can make your mortgage payment or car loan payment.

Debt Relief Tip – 15 red flags you need assistance with your bills!

Persistent problems paying debt & bills or over spending mean it may be time to call for help. Here are the warning signs — and here’s what to do about it.

Here are 15 instances that could indicate that your balances are getting the better of you and that debt reduction might help.

Your credit card balances are rising due to your income decreasing.

You are only paying the minimum amounts required on your accounts, or maybe even less than the minimums.

You’re juggling bills. For example, you apply for another department store card and use cash advances from it to pay an existing card.

You have more charge cards than a gambler has poker chips.

You are at, perilously near, or over the limit on more than one credit card.

You consistently charge more every month than you make in actual payments.

You are working overtime or took a second job to keep up with your credit card payments.

You don’t know how much your balance is and you don’t look at your statements because you don’t want to know.

You have received letters or phone calls about late or delinquent debt & bills payments.

You are using your card to buy necessities like food or gasoline.

Your cards are no longer used for the sake of convenience or points, but because you don’t have the money for a bill.

You are dipping into or tapped out savings or your IRA to pay your monthly debt.

You are hiding the true expense of your purchases from your spouse. (This includes the infamous “Kohls Cash” excuse)

You’re playing the credit card interest rate game signing up for every card that sends you an unsolicited credit offer.

You have just retired, facing a layoff, or lost your job, and are concerned about how you will pay all your bills.